An open letter to HSBC: You owe it to green bond investors to engage with the State Bank of India over Carmichael

HSBC helped SBI raise a green bond. It must not stay silent as it considers lending to a coal mega mine, argues Ulf Erlandsson

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Dear HSBC,

Congratulations to your manifold token awards for being the world’s most sustainable bank.

As you are aware, the State Bank of India (SBI) is currently looking to give a $650m loan to the Carmichael coal mine build in Australia. This could be argued to be the world’s most unsustainable project, with billions of tonnes of CO2 emissions potentially generated as a result. HSBC was the key global bank in raising capital for SBI’s $650m green bond in 2018, as well as a key bank in other USD general purpose corporate bonds in the past few years.

The investor community is concerned about the potential SBI Carmichael lending and has engaged across multiple fronts. Executing marquee transactions like the green bond carries reputational attachment for the duration of the bond, not only financial upside through fee collection on the day of issuance. Investors see green bonds as a vehicle to drive climate and environmental work in the run-up to issuance, but to also expect it to continue to progress throughout the life of the bond. They expect banks to do the same.

And it is crucial that the green bond drives transformational change at the issuer level, not only in the use-of-proceeds part of the bond. In the SBI case, the annual CO2 savings from green bond use of proceeds are 1.6Mtpa for $800m of outstanding bonds, with relatively low additionality as it is mostly refinancing. A Carmichael loan ($650m) would have high additionality and entail at least 30Mtpa CO2 emissions. It is clear that a Carmichael loan would put any intentionality of the green bond in jeopardy. We would expect the angst that portfolio managers feel when they see such green bond developments in their portfolios to prompt serious consideration from the banks that syndicated the bonds.

We see broad support for these views from other stakeholders: asset owners, asset managers and certifiers/second-opinion providers are actively engaging to dissuade SBI from giving the Carmichael loan. HSBC, as the lead bank in the SBI green bond transaction, as well as a leading position in general corporate purpose bonds, is currently a glaring exception.

We believe inaction from HSBC’s side on the critical Carmichael issue risks the bank’s standing in the world of sustainable finance and raises significant question marks around (certain) banks’ role when it comes to green bond issuance. 


Ulf Erlandsson

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HSBC did not reply to a request for comment at the time of publication. 

Ulf Erlandsson is the Executive Chair of Sweden’s Anthropocene Fixed Income Institute. He is a former bond trader at pension fund AP4.